Abstract

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The current insipid economy has created many an occasion for recent case law to draw out important connections between the CVA and administration procedures, and to investigate how these operate in the shadow of the liquidation regime. It is more or less axiomatic that a CVA does not bind all creditors. Some creditors are outside its ambit by legislative default, not by judicial design. Oakley-Smith v Greenberg sheds some light on that legislative default, provides an insight into the relationship between CVA, administration and liquidation, and highlights the danger of judicial approach overly enraptured by the liquidation regime. It also provides a case study of the malign influence of the pari passu myth.

In Part I of this paper, Mokal and Ho argue that in Greenberg v Oakley-Smith, Pumfrey J at first instance and the Court of Appeal, (a), violated the clear statutory implication that creditors not allowed to vote at the meeting to approve a Company Voluntary Arrangement (CVA) are not bound by it, (b), were wrong to hold that since the Greenbergs would have consented to the CVA if allowed to do so, that they would not be prejudiced if later, in effect, forced to participate in it, and, (c), that the Court of Appeal was wrong to hold that the parameters of what the Greenbergs could recover should be set by what they would have received either as parties to the CVA or in an immediate liquidation.

In the concluding Part, Mokal continues the argument by suggesting that the two courts also shared a fundamental misunderstanding about the structure of the liquidation regime, i.e. that it is based on the pari passu principle. The malign influence of this misunderstanding caused the courts to hold that there was no relevant difference between the CVA creditors on the one hand, and the Greenbergs on the other. Mokal argues that, properly understood, the several substantive relevant differences between the two should have figured prominently, as factors additional to those discussed in Part I, in the courts' exercise of their discretion as to what the Greenbergs should recover.